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3 Great Relationships With Money

When it is a question of money, everyone is of the same religion – Voltaire

Cash! Dough! Wonga!… that little something everyone needs to live the kind of life they want to. It’s a word that’s been on the lips of a lot of people in very recent times. Considering the volatile climate of the financial industry and its impact on the world’s economy, I can imagine why the word money is a recurring theme in almost (if not) everyone’s lives.

Recently, we have seen big banks receive huge amounts of bailout money, while some families have been devastated by the effects of the recession. Many have been made redundant and others find it difficult to secure the right job with anything close to the right pay. Those who manage to hold on to their jobs discover that although their salaries aren’t increasing, the price of their usual bag of groceries is doing just that; going up, fast. Inflation is a real concern for most of us living in today’s world and has made us a lot more conscious of our spending and our general relationship with money.

But rather than focusing on the bad financial decisions that created the problems, we can do better and look for solutions instead. The decisions we make about how we use our money has a determining effect on the amount of money we are able to generate and keep for ourselves. We all need to be able to manage our own finances responsibly and it is a simple case of better decisions equal better results. But in order to make better decisions with money, we must first understand how money works and learn to appreciate its value. We must also understand 3 fundamental facts about this tangible resource:

Money must be spent

Money must be saved

Money must be invested

Those who are penny-wise understand that spending, saving and investing money in profitable ventures are the means by which strong economies are built and personal estates, established. Let’s see how:

Spending: Pay Someone for Something Useful

In order to have a stable and successful economy, there has to be a healthy amount of spending between the citizens, businesses and government. This helps to stimulate growth within the economy as companies and citizens earn a living by working for private or government-run firms. The same companies and citizens then spend their money with other businesses and people who pay taxes to government who also spend on public projects. This cycle of trade and commerce is very effective when there is a healthy amount of money flowing through the system. Everyone gets paid for work done and pays someone else for useful goods or services.

As good spending is great for growth, bad spending obviously thwarts it. A successful economy depends on individuals within that economy who are able to plan and budget wisely. Competent accountants will quickly tell you that loose or purposeless spending will rapidly cause a gaping hole to appear on your bottom-line. George Classon in his classic book on financial thrift, The Richest Man In Babylon, ingeniously suggests that we form the habit of only spending nine-tenths or 90 per cent of our actual earnings. And if we happen to be in debt, he recommends that we reduce that amount to 70 per cent and use two-tenths or 20 per cent of our earnings to clear our debts.

That still leaves us with a tenth or 10 per cent of our earnings and a good adviser like the aforementioned author has the right plan for it.

Saving: Pay Yourself First

Robert Kiyosaki famously repeated the words of George Classon in his own best-seller, Rich Dad, Poor Dad. He advocates that we should all remember to pay ourselves first on every pay day. Mr Classon realises that after the taxman has taken his cut from our paychecks, there are several others who also have their hands held out for a small piece of our hard earned cash. These several others tend to take the form of the butcher or the tailor, the landlord, the wine-merchant and many, many more who may just be able to provide one of the many things with which to live life or make life worth living.

Mr Classon and Mr Kiyosaki both recommend that before we go out on our shopping spree, we should simply remove our own cut for self. Pay yourself first simply translates as keeping a little piece of your own pie. It means we should save a little something first before we go out and start spending on living material, luxury items or debts. As mentioned before, as little as 10 per cent of your monthly earnings can be put aside in a saving account and you can watch it slowly accumulate. £100 savings per month turns into £1,200 at the end of 12 months. Calculate what it would be in 10 years. A small business perhaps?

There is a great feeling that comes with watching money that is completely yours slowly accumulate. There is also a feeling of not knowing what to do with it when it becomes a significant sum following a consistent period of regular saving. That is why you may need a very good financial adviser who will help you plan a strategy on where and how to wisely invest your personal treasure.

Investing: Pay For A Great Idea

Following a period of conscientious saving, you may wake-up one day to find that you have a substantial quantity of spare cash and what you decide to do with it could be the difference between having or not having a prosperous future. Investing your money in well-researched and well-thought out business ventures is the most suitable way to use your savings. It not only stops you from spending on irrelevant things that add no value to your life, the right investments can actually provide a very good source of income for you and your family for generations to come. It can help you to manifest your dreams or those of others with great ideas. But how do we know when to make such a huge decision? How do we know what investments will be lucrative or not?

These are all valid questions for any right-thinking investor and a good financial adviser will once again be more than able to offer the proper advice where and when needed.

So there it is … the simple Nyoremes plan to sound financial management. Whether you are dealing with your own personal cash, or in control of private or public funds, you need to spend, save and invest wisely on things that you need and things that will add value to your life and the lives of others. These are the 3 fulfilling relationships we choose to have with our money and we trust that it will also help you to grow and achieve your own financial aspirations. Take good care of that purse now and be lucky.